Quick reads...

The No. 1 Mistake People Make With Their Debt

By: David Bach  |  Last Updated: February 22, 2021
Financial Expert & 10x New York Times Bestseller

For many of us, debt can be a trap that forces us to work longer than we should have to. What puts us into debt are bad habits such as running up big balances on our credit cards and then paying them down slowly, if at all. You can be hurt and held down by habits like these, or you can take action to break them. 

If you find yourself deeper into debt because of the pandemic, or are finding yourself in the red for the first time, you need to first and foremost understand your financial situation. After all, you can’t cure what you don’t face. The top mistake I see people making with their debt is what I call “debt denial.” There’s a dangerous attitude many of us have around our debt, which is: If I don’t see it, it’s not real.


This mentality can even cause people to ignore statements when they come in the mail and not even bother to open them. You might not do this, but I’m willing to bet you don’t know exactly how much debt you currently have. 

It’s time to roll up your sleeves and be honest with yourself.

The average American family with revolving credit card debt has an estimated balance of $7,027, according to NerdWallet’s 2020 American Household Credit Card Debt Study. And that’s just the average. In my experience as a money coach for decades, I’ve seen firsthand that when it comes to credit cards, many of us operate way, way above average. 

How much credit card debt do you owe? Start by figuring out how many credit cards you have and how much debt you carry on each card. To do that, you’ll have to go through your statements.

Then, I want you to create a folder for each credit card and label it appropriately (e.g. “Visa Credit Card”). On the front of each folder, write the total amount of debt you currently owe on that particular card (make the numbers big and bold!) and today’s date. Every time you make a payment that reduces this credit card debt, you’ll cross out the old total and, below it, write down the new, smaller total you owe and the date. This way, you’ll always know exactly how much you owe and who you owe it to. 

Just seeing a record, in your own handwriting, of the progress you’re making each month is really going to motivate you. Trust me. (If you prefer to make digital files rather than handwritten ones, that’s fine — as long as you don’t forget to track and monitor your progress.)

Now that you understand exactly how much you owe and who you owe, it’s time to DOLP your way out of debt. DOLP stands for Done On Last Payment, and it’s a method I’ve taught for decades to help people get out of debt once and for all. 

The process is simple and straightforward. Here’s what I want you to do: 

  1. Make a list of your current outstanding balances on each of your credit card accounts.
  2. Divide each balance by the minimum payment that particular card wants from you. The result is that account’s “DOLP number.” For example, say your outstanding Visa balance is $500 and the minimum payment due is $50. Dividing the total debt ($500) by the minimum payment ($50) gives you a DOLP number of 10.
  3. Once you’ve figured out the DOLP number for each account, rank them in reverse order, putting the account with the lowest DOLP number first, the one with the second lowest number second and so on. This is the order in which you are going to pay off your various balances. 
  4. Focus on paying down the card with the lowest DOLP number. Ideally, this payment should be at least double the minimum payment (more is always better!). For each of your other cards, by the way, you still want to make the minimum payment every month. Once you’ve DOLPed your first account, turn your attention to the card with the next lowest DOLP ranking. Continue doing this until every card is paid off.

The entire purpose of the DOLP plan is to build what I call debt-reduction momentum. It helps you quickly identify the card you can realistically pay off with the fewest payments. And once that card is paid off, you can put that much more toward paying off the card with the next lowest DOLP ranking. As each card is paid off, you have more money left to pay off your remaining cards. If it seems easy, that’s because it is easy! It’s simply a matter of prioritizing your debts and then fast-paying the right card down.

That said, DOLPing does take time, effort and commitment. It probably took you years to get into debt, so don’t expect that you’ll be able to get out of it in a few months. 

The easiest way to stay on track with your plan is by making it automatic. Simply call your credit card company and tell them you would like to arrange for them to make an automatic debit from your checking account each month. If they can’t do that, then check with your bank and see if they can automatically transfer money from your checking account to your credit card company on a specific date each month. 

By automating your plan, you’ll never miss a payment. Plus, you won’t be tempted to put less toward paying down your debt on any given month. Automation forces you to stay on track. And, after you set up automatic payments, you barely have to do any work. You can set and forget!

Check out my top recommendations for credit monitoring companies

Read next: How To Get Out of Credit Card Debt, In 6 Simple Steps